After two years of steady failure across the board, culminating in an embarrassing mid-term defeat and an obsequious public acceptance of that defeat, Obama was immediately knocked further off balance by the Arab Revolt. Suddenly, he seems to be recovering his poise, having nearly caught up with events, and is even showing signs of the kind of foreign policy creativity his supporters have been waiting for.

Obama’s record after two years in office included 1) a total failure to articulate the moral and legal case against the neo-con policies that imperiled national security, wrecked U.S. claims to moral leadership of the world, and undermined constitutional guarantees of civil rights; 2) utter defeat by Israeli extremists; 3) failure to establish the principle that health care is a civil right for all rather than a for-profit business; and 4) kowtowing to corrupt Wall Street millionaires. Unsurprisingly, neo-con-lite impressed no one, and the War Party elitists rolled him over in the mid-terms. Obama looked both like a has-been and a neo-con lackey. Then, the Arab Revolt left him scrambling for two weeks, every step of the way a dollar short and just a bit too late.

But the fall of Mubarak was evidently a dash of cold water in the face, and Obama seems for the moment at least suddenly to have his feet on the ground. Always the diplomat, which may or may not be a good thing, he did not fire his pro-Israel, pro-Arab dictator Secretary of State, who got the job for political reasons and still seems totally out of her element and doing little more than aping Rice. However, Obama did send Clinton a message to shape up and stop defending dictators. One could even be excused for reading between the lines and imagining Obama might ever so gently have been suggesting that Clinton defend U.S. national interests rather than Israeli right-wing partisan interests. On that, time will tell. Political correctness in the U.S. forbids making explicit the moral linkage (obvious to everyone else in the world) between liberty for Egyptians and liberty for Palestinians, between the rise of moderate Arab democracy and the decline of Israeli expansion beyond its 1967 borders.

More interestingly, Obama came up with a new policy toward Iran so ingenious it sounds like it came from an academic political scientist: instead of the usual neo-con/Israeli right-wing threats of aggression, Obama simply noted that the freedom of opinion that the new Washington is now supporting in Egypt (also loudly supported by Tehran) should also apply to Iran! Obama would have been on much stronger ground if he had articulated liberty as a principle, rather than picking and choosing which countries should have it. If he has supported—sincerely—the idea of liberty for Palestinians or Jordanians or Algerians, I am not aware of the fact. Nevertheless, he hit the nail on the head, hoisted Tehran hardliners on their own petard, and moved the U.S. a huge step back toward moral leadership with one simple, logical remark.

Rather than discriminating against Iran’s legal rights to nuclear technology or threatening aggression in a way that only cheapens the image of the U.S. as a civilized nation, he has issued a perfectly reasonable challenge to Tehran: put your money where your very loud mouth is, or, implicitly, stop claiming to be a regional leader. A repressive military-religious regime attacking democracy at home is hardly qualified to lead a liberation movement abroad.

The opportunity for Obama and for U.S. national security is significant. If he follows this line of reasoning to its logical conclusion, he can rescue U.S. Mideast policy. At present he is verbally supporting the right of Egyptians and Iranians to have democracy. In the great contest for Mideast influence between an emerging Iran and a declining U.S., articulation by Obama of the right to liberty and democracy for all would constitute a powerful weapon for winning Mideast hearts and minds. It would put Iran, where brutal oppression is a way of life and the existing features of democracy are under severe attack by the hardline military-religious elite, very much on the defensive. That would constitute a major strategic shift from the past decade during which Washington, perhaps unintentionally, opened the door wide for the expansion of Iranian influence by giving force preeminence in its own stance toward Muslim societies.

Of course, to be effective, changes in U.S. behavior would have to follow: a real peace process would have to replace the Palestinian-Israeli charade, the Egyptian military would have to actually step aside and defend the people rather than controlling them to merit continued U.S. military aid, Washington would have to recognize that democracy means that voters—even if they are Palestinian or Lebanese—rather than superpowers choose leaders, and Washington would have to distinguish between supporting the Israeli right-wing ruling elite and the Israeli people (just as it is now agonizing over the distinction between the Egyptian right-wing ruling elite and the Egyptian people). Washington would have to accept that Muslim parties cannot be excluded from the democratic process without driving them to the extremism practiced by Sam Adams and others Americans now view as patriots.

All this will not be easy to accomplish, but once done, it would remove the fatal inconsistencies that currently cripple U.S. efforts to retain influence in the Mideast. Iranian hardliners, certain individual dictators, and al Qua’ida would all be undercut. Political Islam in a broad range of variations would gain influence and occasionally form regimes, at which point it would have to bear the burden of formulating and implementing policy—with a newly politicized and empowered public carefully watching. Enormous change would result, with unforeseeable effects, but compared to the horrors of global jihad and the endless destruction of the so-called war on terror, an American-supported, non-violent, heterogeneous, competitive, democratic Arab liberation movement does not sound so bad.